Farmers Get Sales Tax Break on Farm Machinery

BISMARCK ---Tax Commissioner Rick Clayburgh announced that on July 1, 2002, a sales tax exemption approved by the 2001 Legislative Assembly, goes into effect. The exemption applies to used farm machinery and all farm machinery repair parts used exclusively for agricultural purposes. The current sales tax rate of one and one-half percent, effective since May of 1999, was originally set to expire on June 30, 2001. During the 2001 legislative session lawmakers extended that one and one-half percent rate through June 30th of this year. On July 1 the sales tax exemption goes into effect.

“Agriculture producers need some relief , they’ve been hit hard with rising operating costs and low commodity prices,” said Clayburgh. “It’s estimated that North Dakota’s farmers and ranchers will save about $2.43 million in sales taxes per year.”

The sales tax exemption, effective July 1, is available on the sale, lease, or rental of used farm machinery, used farm machinery attachments, used farm irrigation equipment, and all farm machinery repair parts (except tires). The exemption includes state and local sales taxes on qualifying equipment or parts that are used exclusively for agricultural purposes.

The tax break also helps North Dakota implement dealers and other agriculture-related retailers compete with out-of-state businesses.

“Minnesota has provided similar sales tax exemptions for some time and Montana does not have a sales tax,” said Clayburgh. “Now our North Dakota farm and ranch suppliers and equipment dealers can compete on a level field.”

The sales tax exemption is provided for “used” machinery that meets one of the following:
• Was subject to North Dakota sales tax on a previous sale,
• Was originally purchased outside this state and previously owned by a farmer; or
• Has been under lease or rental for three or more years.

Clayburgh added that all farm and ranch supplies as well as farm machinery accessories will remain subject to the five percent sales and use tax rate plus any applicable local tax. New farm machinery, new attachments, and new irrigation equipment will continue to be taxed at the 1989 legislatively-reduced state sales tax rate of three percent plus any applicable local sales tax.

For more information regarding the farm machinery and repair parts sales tax exemption, visit the Office of State Tax Commissioner web site at www.nd.gov/tax or call 701-328-3470 (Bismarck and Mandan) or 1-800-638-2901.